TESTING THE OPPORTUNISTIC APPROACH TO MONETARY POLICY

Christopher Martin and Costas Milas

Manchester School, 2010, vol. 78, issue 2, 110-125

Abstract: The opportunistic approach to monetary policy is an influential but untested model of optimal monetary policy. We provide the first tests of the model, using US data from 1983Q1 to 2004Q1. Our results support the opportunistic approach. We find that policy‐makers respond to the gap between inflation and an intermediate target that reflects the recent history of inflation. We find that there is no response of interest rates to inflation when inflation is within 1 per cent of the intermediate target but a strong response when inflation is further from the intermediate target.

Date: 2010
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https://doi.org/10.1111/j.1467-9957.2009.02133.x

Related works:
Working Paper: Testing the Opportunistic Approach to Monetary Policy (2007)
Working Paper: Testing the Opportunistic Approach to Monetary Policy (2006)
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